May 11, 2020 · 42m · 20vc
20VC: Floodgate's Mike Maples on 3 Key Breakthroughs Startups Experience in Success, The Rise of Angel and Operator Funds, Multi-Stage Funds Re-Entering Seed Investing and The Insight Development Framework
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In this episode of The Twenty Minute VC, host Harry Stebbings interviews iconic seed investor Mike Maples Jr. of Floodgate to discuss the mechanics of early-stage startup breakthroughs, the insight development framework, and optimal fund strategy in an evolving venture landscape. Maples shares actionable advice on navigating macroeconomic shifts, avoiding fake growth, managing cash runway, and identifying non-consensus technology inflections before they become mainstream.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 35.2% of the talking time here. How this is scored →
Harry as informed peer 4.8 Guest teaching 3.8 Guest disagreement 1.3 Harry pushing back 3.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 28:36 Mike rejects Harry's claim on seed ownership limitation
Mike explicitly rejects Harry's assertion that seed funds cannot build ownership in winning companies due to multi-stage funds, citing data points like Baseline in Stitch Fix.
Hardest push from Harry ▶ 12:45 Harry challenges false equivalence between 2008 and present macroHarry forcefully pushes back against VCs comparing current conditions to 2008, pointing out that previous success was driven by underlying platform shifts like GPS and the iPhone rather than macro cycles.
Biggest teaching moment ▶ 8:00 Mike contrasts corporate Bible salesmen with startup prophetsMike reframes market sizing theory for Harry by explaining that incumbents view markets as static maps while successful startups treat markets as movements led by prophet-like founders.
Harry holds his own ▶ 20:35 Harry calls out performative VC 'open for business' messagingHarry uses industry insights to challenge the superficial public marketing of VCs tweeting 'open for business' while privately retrenching capital.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Mike Maples' Origin Story in Venture Capital | 5 | 4 | 1 | 3 | Harry asks Mike about his origin story and the stages of breakthrough in early-stage startups. Harry demonstrates domain expertise by highlighting how pre-seed raises have inflated to ten-million pre-valuations and questioning if founders can skip seed stages. | |
| Transitioning from Insight Development to Customer Development | 4 | 5 | 1 | 2 | Mike explains insight development versus customer development, using the metaphor that big companies think like Bible salesmen mapping markets while startup founders must act like prophets building movements. | |
| Founder Patterns and Evaluating Potential Energy in Insights | 3 | 5 | 1 | 1 | Mike shares the story of backing Justin.tv/Twitch and explains his framework for evaluating potential energy in insights, including technology and adoption inflections as seen with Lyft. | |
| Exponential Improvement Curves vs. Macro Economic Conditions | 7 | 4 | 2 | 7 | Harry strongly pushes back on VCs comparing current macro conditions to 2008, arguing that peers conflate macro downturns with platform shifts like the iPhone and GPS. Mike acknowledges the distinction and expands on exponential underlying curves. | |
| Time Travel Mindset and Applying the Scientific Method | 5 | 4 | 1 | 3 | Harry questions confirmation bias in thesis investing and asks for tactical advice for founders facing macro uncertainty. Mike details practical 90-day waterfall forecasting and maintaining a three-year cash runway. | |
| Venture Capital Realities vs. "Open for Business" Marketing | 5 | 3 | 2 | 5 | Harry calls out the discrepancy between VCs proclaiming 'open for business' on Twitter versus pulling back privately. Mike agrees that public chatter is unhelpful and emphasizes focusing on founder anti-fragility. | |
| Multi-Stage Funds Re-Entering Seed Investing | 6 | 4 | 1 | 4 | Harry notes the irony of VCs urging founders to focus while fund managers themselves expand into stage-agnostic strategies. Mike outlines the distinction between scaling deal coverage and embracing the 'joy of finding greatness.' | |
| Lessons Learned from Missed Startup Opportunities | 6 | 4 | 3 | 4 | Harry argues that multi-stage funds prevent seed investors from concentrating ownership in winner rounds. Mike directly disagrees with Harry's premise, citing counterexamples like Baseline's stake in Stitch Fix and IA's stake in Trade Desk. | |
| Ownership Concentration and the "Herbie" Board Constraint Framework | 5 | 6 | 1 | 3 | Harry references CEO coach Matt Mochary's advice that taking board seats is detrimental to VCs. Mike shares his 'Herbie' constraint framework from 'The Goal' to explain how effective board members focus on fixing the primary bottleneck. | |
| The Inspiration and Focus of the "Starting Greatness" Podcast | 3 | 2 | 0 | 1 | Harry asks about Mike's heightened branding and podcasting efforts with 'Starting Greatness'. Mike explains his motivation to offer advice strictly tailored to the zero-to-one phase. | |
| Quick-Fire Round: Superforecasting, Time Allocation, and VC Challenges | 5 | 2 | 2 | 5 | During the quick-fire round, Harry asks Mike to name the single most impressive new-generation operator fund manager and teasingly calls Mike out for giving a diplomatic 'politician's answer'. | |
| Venture Capital Self-Promotion and Outstanding Board Directors | 4 | 2 | 1 | 2 | Mike critiques excessive self-promotion in venture capital while complimenting Harry's authentic approach to podcasting. He closes by discussing outstanding board members and Floodgate's investment in Commonstock. |
Statements from this episode (31)
Maples commuted to California for 18 months before founding Floodgate
“And then I came up to California to see what was happening in California this about 2004, and I decided if I was going to be in venture, I needed to do it in California. So I came up here without a job, and my kids were in school, so I'd fly up every Sunday ni…”
Maples: Startups begin dead and require three sequential breakthroughs to succeed
“A startup isn't a company because it starts out dead and has to prove it's alive. And so I like to say there's a sequence of breakthroughs. There's the insight breakthrough, and then there's the value proposition breakthrough, and then the growth breakthrough.”
Maples: Skipping startup steps leads to fake growth
“I believe that you can't really skip a step. You got to have an insight before you do customer development, and you got to do customer development before you do smart growth. And so to the extent that raising too much too soon Causes people to skip those steps…”
Maples: Insight development requires getting out of the present
“If customer development is about getting out of the building, insight development is about getting out of the present, and it's about trying to put yourself into situations where you can live in the future and notice what's missing before other people notice”
Maples: Marc Andreessen's Mosaic browser created the market from scratch
“When Marc Andreessen invented the Mosaic browser, there was no market for browsers. The product defined the market.”
Maples: Startups begin when founders bring future insights to the present
“A startup starts when someone living in the future comes back to the present with a new idea, a breakthrough insight, and the market becomes a movement.”
Maples: Evaluating seed startups as businesses gives the wrong answers
“When I think about what is seed investing really, it's not investing in a business because it's not a business yet. In fact, evaluating it as a business will give you precisely the wrong answer most of the time.”
Maples: iPhone 3GS improved smartphone GPS accuracy tenfold
“The technology inflection was the GPS locators in smartphones were 10 times more accurate with the iPhone three GS and beyond.”
Maples: Lyft and Uber could not exist before the iPhone 3GS
“So before the iPhone three GS, you could have had the idea for Lyft and Uber. It wouldn't have mattered because you wouldn't have been able to connect drivers and riders accurately on a map.”
Maples: Rejecting ideas because past attempts failed is terrible VC reasoning
“In fact, that's, I think, one of the least imaginative questions a VC can ask is, like, well, 10 people have tried this, and it hasn't happened, so I don't think it's going to happen.”
Stebbings: 2008 startup success came from platform shifts, not macro downturn
“For me, I strongly push back on that because I think they're conflating the macro economy with the technology advancements of GPS, of the rise of the app store and of the iPhone with the macro environment that was also simultaneously happening at the same time…”
Maples: Great startups rely on exponential technology improvement curves
“I generally believe that most great startups are born of these exponential improvement curves that are beneath them. They're like gathering waves in an ocean that you surf back to the beach. And I think it's really hard without a gathering wave to really be gr…”
Maples: Founders without quantifiable technology inflections lack strong core insights
“And so I think if I'm a founder, if I cannot answer clearly what technology inflections are happening that can be calibrated that I'm taking advantage of, I should either evaluate whether my insights powerful enough in the first place, or if I've just thought …”
Maples: Non-consensus success comes from spotting unseen future probabilities
“Being non-consensus and right is not about living in the present and just saying, hey, the world is going right, so I'm going to go left. Being non-consensus and right is discovering something in the future that others don't see yet and making the bet that wha…”
Maples: Most startup insights turn out to be wrong
“Yeah, and I think probably more often than not, an insight will be wrong.”
Maples: Startups should target at least three years of cash runway
“I like to assert it should be a minimum three years.”
Maples: Startups wildly underestimate how much cash runway they need
“But I think that most startups right now wildly underestimate how much runway they need and have for quite some time.”
Maples: Momentum-driven VC investors will struggle in shifting markets
“But I think that the people that have played the momentum game are going to struggle.”
Maples: Operator funds are a net positive, not competitors
“I don't look at people like that as a competitor. I look at people like that as a fact, and I just like to embrace the change wherever it's going. And so all things being equal, I'd like to help them and hope they'll make the ecosystem better, and it'll be mor…”
Maples: Anyone stating certainty about the future is confused
“If somebody's telling you they know where things are going, they don't know what they're talking about. You know, anybody who's telling you they have any degree of certainty about what's gonna happen is confused.”
Maples: The best long-term venture strategy requires focus
“If they want to be in every part of it, if they want to be in seed, if they want to be in series A in growth, and someday maybe be hedge funds, that's up to them, and I wish them well, but usually I tend to believe that the best long-term strategy is to be mor…”
Maples: VCs must accept missing deals to focus on essential partnerships
“And I think that the other extreme would be what I call the joy of finding greatness. And in the joy of finding greatness, you say, look, I'm going to be comfortable with the fact that I'm not going to see every great deal. I'm going to be comfortable with the…”
Maples passed on a $250K seed investment in Airbnb
“Brian Chesky at Airbnb at the time is called Airbed and Breakfast pitched me And I passed, and I had an opportunity to invest 250,000 dollars that would now be worth close to a billion.”
Maples: VC firms must choose between scale or doing less but better
“And so I think fundamentally in venture, you can do more with scale or you can do less, but better. And you just have to decide.”
Stebbings: A venture fund's size fundamentally dictates its strategy
“Kind of your fund size is your strategy as well, and so that's always very much front and center for me.”
Stebbings: Seed funds cannot reliably build ownership in breakout startups
“With data transparency now, they come in very aggressively on anything that's popping, and the theory that you can build ownership over time, to me, is actually quite false, and I don't actually see it, because in the companies that are obviously popping, mult…”
Maples: Scaling acquisition before fixing retention creates more unhappy users
“If you have a customer engagement problem, acquiring more customers is counterproductive because then you just have more unhappy customers.”
Maples: Early-stage startups operate like jazz bands, not marching bands
“The zero to one phase of a startup is just different. You know, you have a jazz band instead of a marching band”
Maples: Tetlock's Superforecasters is essential reading for startup founders
“My favorite book of recent times is Super Forecasters by Tetlock. So the reason I like it is it provides a lot of frameworks for how to deal with uncertainty. And I think that that's what founders need right now.”
Maples: Developing original VC ideas is harder now due to market noise
“It's easy in this business when there's so many competitors around you To get kind of caught in the herd noise traffic of what's happening today all around you, and how do you just stay out of that? How do you stay out of that noise? How do you turn off that n…”
Maples: Venture capital has become overly self-promotional with platform noise
“It's gotten a little bit Too self-promotional, I think. So I think that a lot of people now are overly focusing on their personal platforms, and I can understand why some do, but there's an awful lot of noise out there now.”